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Fugro, a surveyor and geotechnical-services provider, has found itself on unstable ground in the past year, but the Dutch company appears to have regained a firm footing that should enable it build solid returns.

Fugro's
FUR.AE -1.420678768745067%Fugro N.V.Netherlands: AmsterdamEUR24.98
-0.36-1.420678768745067%
/Date(1427841300000-0500)/
Volume (Delayed 15m)
:
1043713
P/E Ratio
N/AMarket Cap
2143067910.2
Dividend Yield
N/ARev. per Employee
190012More quote details and news »FUR.AEinYour ValueYour ChangeShort position
shares (ticker: FUR.Netherlands) fell out of favor with investors after a troubled 2012 in which the CEO was replaced following a dispute over strategy, a whistleblower prompted a review of its finances, and uncertainty created by a drawn-out sale of most of its geoscience businesses sparked a profit warning.

The company, which has a market value of 3.67 billion euros ($4.74 billion), maps terrain and drills holes to investigate the properties of soils and rocks. Its services are in demand from the oil and gas industry to position drilling equipment or route pipelines.

Fugro's problems appear to be behind it. Its shares can add 25% in the next 12 months, according to some analysts. The stock, which closed in Amsterdam on Friday at €44 ($56.85), trades at 11.7 times forecast 2014 earnings of €3.80 a share. In comparison,
Oceaneering InternationalOII 0.27891409445890664%Oceaneering International Inc.U.S.: NYSEUSD53.93
0.150.27891409445890664%
/Date(1427835813100-0500)/
Volume (Delayed 15m)
:
956801AFTER HOURSUSD54
0.07000000000000030.1297978861487113%
Volume (Delayed 15m)
:
63539
P/E Ratio
13.448877805486283Market Cap
5357886128.84399
Dividend Yield
2.002595957722974% Rev. per Employee
295131More quote details and news »OIIinYour ValueYour ChangeShort position
(OII) trades at 18.9 times. At the same multiple as its rival, Fugro would be worth about €70 a share.

Since the start of 2013, the stock has been flat. It trades almost at the midpoint of its 52-week range, roughly 20% below its closing high of €54.52 and nearly 20% above its closing low of €35.63. And it has a dividend yield of 3.4%.

The shares' volatility is understandable, given recent news. In September, Fugro announced the sale of most of its geoscience operations to France's
CGGCGG.FR -0.7561436672967864%CGGFrance: ParisEUR5.25
-0.04-0.7561436672967864%
/Date(1427841300000-0500)/
Volume (Delayed 15m)
:
1610518
P/E Ratio
N/AMarket Cap
936674835.120499
Dividend Yield
N/ARev. per Employee
240876More quote details and news »CGG.FRinYour ValueYour ChangeShort position
(CGG.France) for €1.2 billion. However, months of uncertainty before the deal closed spooked customers, who withheld business, prompting the company to issue a profit warning in November. At the same time, CEO Arnold Steenbakker departed. Fugro cited a "difference of opinion" on the company's direction. He was succeeded by an insider, Paul van Riel. Then, in December, a whistleblower raised concerns about Fugro's financial reporting.

This year, Fugro's prospects have improved: The deal with CGG closed at the end of January, and an independent investigation into the whistleblower's allegations concluded with "no material adverse findings." But while European stocks are up 8%, this year Fugro's shares are unmoved.

James Hunt, who runs the
Tocqueville International
fund (TIVFX), sees an opportunity. He says that, because the sale of the geoscience businesses concluded after the end of Fugro's last financial year, its balance sheet looks less robust than it actually is. He says that Fugro generates strong cash flow and is underleveraged, providing room for special dividends or acquisitions. The company is projected to produce €390 million in free cash flow this year, FactSet reports, up from €61 million in 2012. Hunt also likes the high barriers to entry into the company's core business.

Over all, Fugro's outlook is bright. It says that opportunities in emerging markets are developing faster than expected for its survey and geotechnical units. Revenue for 2013 is forecast at €2.65 billion, up from €2.17 billion last year. Earnings are estimated at €3.72 a share, versus €3.60.

Hunt reckons fair value is €60, about 30% above where the stock is now, but says that free-cash-flow generation and return on capital will add 12% a year to intrinsic value for the next three years, after which it could be worth €85.

Reality Check

European bourses mostly fell, led by a 4% drop in Italy and a 3.7% slip in Spain.